NUMBER OF ABSTRACT: 011-0922
Logistics Costs: an essay of the modal shift operation on containerized cargo
Camila Papa Lopes, Unisantos, R. Dr. Carvalho de Mendonça 144, Santos – SP, Brazil, , 55-13-91191183
Getulio Kazue Akabane, Unisantos, R. Dr. Carvalho de Mendonça 144, Santos – SP, Brazil, , 55-11-99787520
Luiz Silveira, Unimes, Rua da Constituição 374, Santos – SP, Brazil, , 55-13-97362095
Rafael Mateus Barreto, Unisantos, R. Dr. Carvalho de Mendonça 144, Santos – SP, Brazil, , 55-13-97408776
Washington Pereira Soares, Unisantos, R. Dr. Carvalho de Mendonça 144, Santos – SP, Brazil, , 55-13-97817942
POMS 20th Annual Conference
Orlando, Florida U.S.A.
May 1 to May 4, 2009
Abstract
The present paper analyzes the competitive advantages in the logistics costs through the utilization of modal shift and the decision taking by transport companies in this modality, which may influence the logistics and environmental costs, representing an alternative to decrease the port chaos, as well as it allows the responsible management of the environment. The port transactions require holistic elements that contribute to the management of decision. Particularly in the studied case, the rail modal was emphasized as a sustainable option in the modal shift since it reduces the emission of CO2, which represents gains for the company and for the society; however, not many theoretical references are found on this logistics tool in Brazil, what makes necessary the holding of deep studies on the theme for its utilization by the companies. It has been proved that modal shift is a complex alternative, which requires attention to the several factors involved in the containerized cargo transportation, from the distance between ports and hinterland, adding competitive advantages through operational logistics costs and inventory-theoretic in the supply chain and the kind of modal adequate to the identified conditions in the geographical and political space being studied.
Key words: logistics costs, modal shift, intermodal transport, container, rail modal
Introduction
The present paper identifies modal shift as an option to decrease logistics costs and minimize congestions, urban conflicts and to create awareness for the users of containerized cargo of the consequent reduction of social costs, for the better distribution of rail modal in the matrix of national transports.
The objective is to show the competitive advantages in the logistics costs by using the modal shift, as well as the decision taking by the companies of cargo transports through this modality, with emphasis in the rail modal.
The system of transports in Brazil does not count on significant investments up to the event of the privatization of the railways (decade of 1980, with the deregulation of the Rail Federal), and ports (Law of ports modernization, nr. 8630/93), what has generated to the transport sector a delay in the execution of works of infrastructure and a major participation of the private enterprise, mainly by the logistics services providers - what has resulted in a transition with regards to the opportunities of utilization of more than a modal on the cargo transport, specifically supporting containerization.
As per Nazário (2008), the transported goods through more than a modal are commodities, as iron ore, grains and cement, all characterized as low added value goods. In these segments, the diffusion of the utilization of container in Brazil is seen as too insipient. For this reason, the practice of transports through more than a modal in Brazil requires technical studies to render viable the practice of the modal displacement of the cargo in a sustainable way.
Modal shift in the study of the containerized cargo intermodal transport can be a solution to the bottlenecks which generate cargo urban conflicts. A logistics paradox is observed on the perspective of costs analysis of the port users in this segment. If the solutions of new projects propose a displacement of the cargo from the conflict zones to areas which are distant from the point of vessels berthing, this generates a new cost of transport and transfer towards hinterland of the (organized = delimited) port of Santos.
In the practice of modal shift, the excesses of cargo displacement render more expensive of the intermodal transport logistics even when containerized, which logistics is competitive when the transshipment option is adopted against analysis of the costs involved.
To Bortolim et al. (2008), the transport through means of containerized cargo is the common denominator of rail, road and water transports, and its main importance – besides the characteristics of facilitating and rendering speedier the transport with unitization - is to standardize and provide more safety to cargo avoiding damages and thefts – and it also renders possible the reduction of operational costs as well as the integration of transports, establishing – therefore – the intermodality. In a globalized environment, costs reduction and intermodality are fundamental for international competitiveness, besides the contribution for the society and the environment considering the reduction of emission of CO2 through the adoption of modals which are not regularly used or are very seldom used.
A study of case has been carried out in a road and rail transport company, that works with modal shift for containerized cargo and in this case it has been detected that the adoption of the rail modal for the effective flow of the supply chain in the production of services and manufactures is a sustainable alternative and adds competitive advantages counting from the reduction of logistics costs.
Theoretical references
The transport operations become dependant on a logistics of support in order to be more competitive before the production and consumption, which contribute to increase the port demand continuously. For this purpose, an integrated network of suppliers, industries, distributors and transportation companies was created in order to improve the quality of services in an attempt to maintain the global flow of goods having as an origin the hinterland.
The competitiveness in the cargo transport is obtained from the relation cost/service/logistics/handling of cargo and for this reason the analysis of logistics costs is relevant in the modal shift planning.
According to Rios; Maçada; Becker (2003), the strategic function of the containerized cargo transport operations are obtaining more relevance due to the level of detail of the activities involved vis à vis the needs of expansion of operations and planning once the competitive advantages in costs and quality of services are directly linked to efficiency in operations. In the conception of Martins; Caixeta Filho (2001, p.15):
[…] the availability of an adequate structure increases the gains of efficiency to the productive system and not only to companies individually. This happens because there is a growth of the final product, increasing the productivity – at the same time reducing the costs per unit of component. Higher productivity, in its turn, is translated by the increase of remuneration of factors, what stimulates the investment and employment.
The inherent characteristics of the operations reduce the global logistics costs, at the same time elevate the levels of service through standardization of functionalities and operational requirements for handling, going for the concept of multimodality, i.e., the optimization of logistics elements, viz: transports, storage, packaging, handling, IT systems, inventories and fiscal matters (BOWERSOX; CLOSS, 1996).
Aspects of modal shift
In this paper are considered the main regional development and geography of transportation, proposed by Rodrigue; Comtois; Slack (1999), Blauwens et al. (2006) examines the influence of total logistics costs and Ogawa (2004) emphasis on the environmental benefit, considering that the exchange of modal will reduce the emission of carbon dioxide, Geerts (2002) deals on the market for modal shift in intermodal transport. Bravo (2000) refers to the multimodality, focusing on theory of cost transshipment port.
Geerts (2002) proposes the adoption of IPI (Intermodality potential index) which measures the intermodality potential from the equation of division between potential and current market of the intermodal transport, which influential factors are:
- Transfer costs
- Door to door delivery time
- Frequency
- Information tracking (delays)
- Reliability
- Distance
Rodrigue; Comtois; Slack (1999) take it that the analysis factors include the distance but include also the logistics costs and available modal options, as laid out below. Consequently, they defend a holistic analysis for the decision making progress, meaning analyzing the distance, operational logistics costs and finally choose the modal options.
Picture 1: The principles of modal shift
Source: Adapted from Rodrigue; Comtois; Slack (1999)
In opinion by Rodrigue; Comtois; Slack (1999) the elements which more affects the transport costs are:
· Geography: the distance and acessibility involve the impacts, specially the friction of distance that involve lenght, time, economic costs and energy used;
· Type of product: packaging, handling and others factors;
· Economies of scale: the larger quantities transport results in lower unit cost;
· Energy: lower energy and CO2 emission with intensive transport modes;
· Trade imbalances: between imports and exports;
· Infrastructures: infrastructures has a direct impact in transport costs with the efficiency and capacity prejudiced;
· Mode: the modal shift often results in lower transport costs;
· Competition and regulation: competitive and regulatory environment.
As per Jolic; Strk; Lesic (2007) the distance is the main factor for the decision of adoption of intermodality considering that the strategic planning can only be defined from the geographical position of the port up to the hinterland. According to the authors, what is decisive for the port situation are the high additional transport costs (caused by the difference between the minimum and maximum distances of transport) which are complementary or contrary to the cargo transfer costs in the ports, i.e., the strategic positioning can be adopted as a tool for analysis of the port competitiveness, which also depends on the infra-structure for the definition of modals and the modal transfer as a whole.
The strategic planning can be adopted as a analysis instrument of port competitiveness combined with the infrastructure to define mode and modal shift.
To Rodrigue; Comtois; Slack (1999) the modal transfer occurs when a modal (a) has a comparative advantage on another (b) in a similar market. The competitive advantages are available in various way as in costs, in capacity, in time, flexibility and safety – each point analyzed in a considerate way taking into account what is being transported. We can infer this rationale if it is considered that for some the transit time is essential and the modal transfer will occur only if the new modal offers improvement in the transit time, while for others the most important item will be costs, which are in this case critical for the modal transfer.
So, the modal transfer represents the delimitation of the decisive process which considers the competitive advantages of a modal in regards to another. Its result comes from a series of decisions taken by the companies (for the cargo) or individual (for passengers) in the transfer to a more convenient modal only if the competitive advantages are the most significant.
In the vision of Blauwens et al. (2006), the analyses is based on the structure of the inventory-theoretic which studies the choice of modal from the business logistics point of view. The critical point of consideration of the inventory-theoretic is the fact that the focus is all costs involved in the supply chain – which is affected by the choice of transport modal. Therefore, the market analysis is used in the container transport from the port to the hinterland. It shows that the combination of certain political measures may lead to significant displacements of unimodal to intermodal transport. However, obtaining the the modal displacement is not an easy task. The alternative of studying the modals in the cargo transport may only show viable competitive advantages in comparison to road transport if they can meet logistics exigencies which suit the supply chain clients.
As per Rodrigue; Comtois; Slack (1999), the process of decision to modal shift, normally goes through three defined steps: initiation, change and maturity. Based on the Brazilian scenario, this survey proposes that these steps be divided in four steps as follows:
Initiation: (initiative the inertia proposed by Rodrigue; Comtois; Slack) stage where the perception of a possible change in the modal be of difficult perception as well as slow. In this stage, the result of modal shift is prone to show fewer advantages than the expected leading to a situation of low performance. The reasons behind this inertia are linked to the accumulation of investments employed in the current modal. At this point, it will be possible to check possible reluctance by the transporters and owners of the cargo, bearing in mind the perception and actual knowledge on the advantages and the modus operandi in operations vis à vis the adaptations of the new modal. The negotiation of new procedures and contracts are certainly tasks which corporations do not wish to carry out if the benefits are not visible. While the current modal shows to be reliable – even when too expensive – there will be resistance in the politics of modal alteration. So, the pioneers in the modal change may be seen as adventurers, wishing to test the risks and lay aground the current system with a view to obtain the rewards destined to the explorers.
Change-determination/expansion: The change phase can be split in to determination and expansion phases. The determination determines a quick transition of a modal to another since the perception of the competitive advantages gets clear. The new transport modal develops from an unsatisfactory performance situation envisaging a better performance. At this stage in general the modal change occurs based on a better-than-expected-result and the transition phase runs very quickly going to a phase of expansion, in which the competitive advantage becomes inherent to the supply chain strongly attracting the demand – and this may generate among users and stakeholders an ambiance of surprise due to the agility of the transition.
Maturity: Here are the new balance of the acting powers - such as the capacity, costs, time, flexibility and safety - in the matrix of participation by the achieved modal change.